4 The Health Insurance Tax What Is It? Established as part of PPACA o Funds Exchange subsidies and Medicaid expansion Tax imposes at least $84 billion in assessments through 2020 o $8 Billion in 2014, grows to $14.3 Billion in 2018, and indexed to the rate of premium growth in later years o No set end date Employers and consumers will begin to see the impact of this tax in both new and renewed health care policies issued beginning now 4

5 How the Tax Works Applies to: Fully-insured: Major medical policies Dental & Vision Medicare Advantage plans Medicaid Managed Care plans Does not apply to: Self-insured products Certain non-profit Medicaid plans Excepted Benefits Each insurer will be assessed based on respective percentage of total net premium written per year 5

6 The Impact of the Tax Eliminates Jobs 249,000 cumulative jobs lost by 2021 o 59% incurred by small businesses Reduces GDP reduction in real GDP by $36 Billion by 2021 Adds Costs to States - $14.9 Billion in additional Medicaid costs o Incents states to return to a fee-for-service delivery model Raises Premiums for Consumers Premiums Increase 3.7% by 2023 o Individual premiums will increase by approximately $2,800; family premiums will increase by as much as $5,000 over ten years o Rising premiums could prompt more young and healthy individuals to forgo coverage, which could lead to a less stable risk pool and further exacerbate pressure on employers health care costs Hurts Seniors - $16 to $20 more per member per month for Medicare Advantage coverage in 2014 o Resulting in higher out-of-pocket expenses for seniors and/or reduced MA benefits 6

8 Tax Picks Winners & Losers Non-deductible for Federal taxation purposes o For each dollar assessed, more than a dollar in premiums must be collected o However, this does not apply to tax-exempt plans, and has less impact on non-profit plans o Tax-exempt plans o $1 in premiums collected for every $1 in tax assessed PLUS the 50% credit on their obligation o Non-profit plans o At least $1.20 in premiums collected for every $1 in tax assessed o For-profit plans o As much as $1.54 in premiums collected for every $1 in tax assessed $0.54 $0.20 $1 $1 $0.50 Additional Premium Collected Health Insurance Tax Assessed For-Profit Plans Non-Profit Plans Tax-Exempt Plans 8

9 This Tax Is Different from Other Taxes U. S. C h a m b e r o f C o m m e r c e Non-deductibility Creates an unlevel playing field Collects set amount if carriers are missed, it means more for others No refunds/ credits for unused funds A recent Congressional Budget Office update to its August 2012 estimates for future health care coverage found that, taken together, Exchange subsidies and Medicaid expenditures will be lower than previously estimated over 10 years. Pushes Insurance Carriers to one of the highest effective tax rates 35% 45% 9

14 What Can You Do About the Health Insurance Tax? There is legislation pending in the U.S. House of Representatives and soon to be re-introduced in the U.S. Senate to repeal the tax H.R. 763 To repeal the annual fee on health insurance providers enacted by the Patient Protection and Affordable Care Act (112 th Congress - S. 1880) Jobs and Premium Protection Act 14

17 Engage Members of Congress on Regulatory Methods to Impact the Tax Exempt assessment from Federal taxation o Determine that recoupment of any fees from policyholders is not considered income for purposes of Federal tax collection to ensure consumers will have more choices for health coverage Ensure a transparent and open assessment process o Create process where interested stakeholders can determine how the respective fees are assessed, and allow them to provide input and reaction, thereby ensuring an accurate and fair assessment Collect only the amount necessary o In future years, take into account the unspent portion of funds needed for the Medicaid expansion and subsidies already collected from health insurers before making future assessments 17

18 Tips for Reaching Out to Your Elected Officials Legislators want to hear from their constituents YOU! / write letters to your Senators and Representative o These letters are most effective when personalized with your own experiences Call Legislators office in Washington, D.C., and District offices o When you call, speak to a member of the policy-maker s staff. Give the staff member your name and address and be sure to note any personal connections you might have - professional affiliations, face-to-face encounters, etc. 18

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